Former PIMCO co-CEO Mohammed El-Erian says we're fussing too much over the Fed
We're still three days away from the Federal Reserve decision and it already feels like speculation has gone on for months.
"It's too close to call," El-Erian said today on CNBC. "And the big question is not whether they are going to hike or not. The big question is why are we so obsessing over a single hike? And that says a lot about how codependent markets and central banks have become."
If you want to be Warren Buffett and ignore the Fed in favor of a 5-10 year investment horizon then that's a great argument. But if you're worried about the next 300 pips in the US dollar then it holds much less water.
Another way to look at the Fed
The question about a hike or not has been beaten to death. There's no analysis left to do except for watching the news and economic data, like tomorrow's US retail sales data.
Where there is valuable insight are the secondary questions. Here are three still worth asking:
- Does the Fed really want to tighten financial conditions to control inflation, or do they just want to get off the floor
- If they Fed hikes, when will they hike again?
- Can the Fed meaningfully push rates up with $2.5 trillion parked in cash at the Fed
The Fed is proud of its data dependence and not telegraphing a rate rise but they might have been better served by pre-committing and giving markets more of a chance to focus on questions like this.